Big Boss’s Dismembered Arm. Jacob’s Hidden Stabby Knife. Pipboy Wristband for a phone that won’t fit inside. A statue of a dragon that will never see the light of day. Another year goes by and more toys begin collecting dust, trying to match the shade of grey as the collectables next to them. A Street Fighter 4 duffle bag, with matching 4gb USB stick. Travel Chest housing a Nathan Drake Statue. A lie of reselling at mark-up that will never be true. Things that I’ll never use, nor had any intention of using.

Books filled with in-game pre-order bonuses that will never be redeemed. Enough digital bow and arrows to build a small log cabin. A digital black market of goods that will never be offloaded. Ships whose cargo never reaching their destined port.

Why do we fall for preorder bonuses every time when we know they are money sinkholes? Are these toys really that enticing? Do we feel like we’ll be missing out on some grand revelation by not getting the ultimate collector’s definitive edition boxset? (super turbo world champions)

We can’t value things on our own

There are two big problems when talking about any pre order bonus: that we like objects over money and that we are inherently bad at valuing the objects.

What do I mean by liking objects over money?

Well, there’s a conjecture that I’ve been throwing around as the Cappuccino Conjecture that was brought to my attention by Professor Dan Ariely. He’ll be coming up a lot in this article since the background of this topic is what he’s spent his life’s work on, so look him up if you’re interested in biases around decision making and money behavior.

The Cappuccino Conjecture goes like this: If a cappuccino costs $3, can I get you to do something for a cappuccino that you wouldn’t do for $3? If so, then a $3 cappuccino is worth more to you than $3.

That would mean that there is some property of the cappuccino that is more emotionally appealing than the $3, some Hedonic Value to amplify the cappuccino to gives us more satisfaction than the $3.

The takeaway is that we sometimes place a higher value on specific items over the monetary value of those items.

Those knickknacks sitting on your desk, the plastic toys to display on your shelf, the busts and statues that become centerpieces on your coffee table for a short time before being tucked away. Something about them give us a satisfaction that we’ll front the extra cost $30, $50, $70 to get the limited edition.

The thing is, many preorder bonuses don’t even give us much. But instead of seeing that, we see the things that we’d be missing out on. We’re pretty bad at deciding which tier of per-order bonus makes the most sense for us. Because of this we fall for a number of marketing tricks to get us to spend more than we would normally to get what we believe will be the most satisfaction out of the game instead of rationalizing what pre-order bonuses we’ll actually use.

We don’t run a cost-benefit analysis to find optimal utility to purchase price, nor should we normally. It’s a lot of time and effort to do. Which is why we use the options around us to influence our decisions as best as we could. But this is why we are so bad at valuation of things.

An extreme of this is viewing other products as more enticing by adding frivolous or irrelevant additions.

Imagine being given two options. The first is an all inclusive trip to Rome for one week and a trip to Paris for one week. The second is an all inclusive trip to Rome for one week for free, but you aren’t given coffee, and you’re also given a trip to Paris for one week.

Most people would pick the first package, regardless if they were coffee drinkers and regardless if they would drink coffee during the trip. The rationale for this strictly being that if you could have the package with more why would you take the one with less?

The Rome+Coffee package becomes more desirable when compared directly to Rome-Coffee. And it’s that constrast that makes the desireable option more attractive.

But a study comparing two free things isn’t saying much about falling for a bias that works against us. All that it does is suggest that we like things where we get more out of it. Not the biggest scientific discovery that gives us better insight in how we think. What does help show that we are bad at valuing things is when we introduce a reference point for valuing an item.

There was an experiment held at Carnegie Mellon by Professor Drazen where he had each student in his class use the last two digits of their social security number to value a list of items that the professor had brought in with him. A cordless trackball, a cordless keyboard, a design book, a one-pound box of Belgian chocolates, a cheap bottle of wine (~$5) and an expensive bottle of wine (~$80).

The prices for the items weren’t given to the students, but each item was described to them. The expensive wine bottle was described with a bit more detail.

The professor then asked two questions. Would you buy this item for the social-security amount? What would be the maximum amount that you would pay for such an item? What the students actually suggested as their average maximum amount is listed below.

What’s important to remember is that using your SSN was essentially a random number being assigned to the students.

What’s important in this experiment is the distinguishment between the high SSN id students and the low SSN id students, mainly the fact that the values among the students varied vastly based solely on what SSN they had. Once a number was given for an item (their SSN) it introduced a reference point (anchor) to judge the price of the item they were given. The actual cost of the item only informed the students that an item was to be considered expensive over another, but they were bad at valuing the items to some degree accuracy.

Think of it like this, you go to a store where nothing had a listed value on it except for one item. How you would pay for things is basing the cost of other items in the store based on your one known item. Do you think that you’d be able to accurately decide what each item that you’re buying would be worth? Do you think that add-ons, toys and cosmetic content would be an easy thing to value for a “bonus” in the game? We know the game is a fixed price, at least at launch, but those add-ons are they exactly the price that we would want them for or are we just comparing them to the anchors that are given?

There’s a reason that when the iPhone originally came out that it was given the $600 price-tag then a few months later reduced to $400. The iPhone was being marketed as a new kind of product, a product that consumers would not know what the normal price is because we have nothing to compare it to. So Apple announced the iPhone with the $600 price-tag giving us an anchor to create a reference for how smartphones should be priced so reducing to price to $400 seemed like such a deal to the masses. “If I could get a new phone for $200 lower than what I think the normal cost of smartphone is, of course that seems like a good deal.” [link]

But valuing what we don’t know at a specific price point is exactly what DLC and bonuses are doing. DLC being set at $5 per expansion story means that when any DLC is more than that, it seems like a rip-off. Season Passes that are more than $20 seems like a rip-off. Bonuses that vary from the $90, $120, $150 brackets need to have a good reason to do so, and need to have bonuses that are comparable to other bonuses within the same price point to not seem like a bad deal.

The same phenomena happened when Apple developed the iTunes store when it first launched. Specifically, that songs being sold at $.99 per song.

It would make a lot of sense for more popular songs to be sold at a higher price and less popular songs to be sold at a lower price, even if only with small variance like $.89 to $1.09. The problem is that we are now stuck with the idea of assigning value (rank) to songs. Is “Drops of Jupiter” a steal for being $.95? Is the “Mario Bros Theme” worth the $1.05 that every gamer wanted as their ringtone at some point? By making the songs $.99, it becomes an decision of “do I want” as opposed to “is this song worth the cost,” making it easier to purchase more and more songs. EDIT: They did start having a 2-tiered model of $1.29 and $.99 for globally popular/unpopular songs, but still reduces cognitive load, just less than the prior model.

DLC and Bonuses are only marginally at this point since there is still no clear model about story expansions only being $5, extra weaponry being $3, themes and skins being $1, etc… It puts more cognitive load on us when games stray away from the standard pricing and putting more (for lack of a better term) stress on us when deciding if we want to buy it. But when the add-ons do adhere to the same standards then we are more willing to buy the content, regardless of if we are going to play/use it.

We enjoy things more when payment isn’t direct

There’s also a different mental scourge keeping us from enjoying the things that we buy, or counter-intuitively letting us add extras to the things that we already buy.

Have you ever bought a new phone, laptop or tablet and took so much time to decide which of the many different kinds of phones, laptops or tablets out there that when you bought the thing you also made your way to the accessories section and splurged just a bit too much on accessories that you might not have performed the same rigorous research that you had done with your phone. The same research to find the best fit for you and to get the cheapest but effective one for your new purchase? You already made the expensive purchase, so who cares if you throw a few dollars away on the accessories that might have an outrageous markup on it in comparison?

The same as we do when buying a new game. $60 for a new game is quite the hefty purchase price when you have such a large range of diversity that the same $60 can get you, even within the games market. If you don’t play the multiplayer than the game can net you as little as 8 hours. A full work day’s worth for the cost of a half work day, if paid minimum wage. If you find a game with longer playability, either an RPG 40-100+ hours or a highly active multiplayer game 100+ hours easily, than the $60 tag seems much more reasonable. But I digress.

You go out and spend $60 on a game that isn’t even out yet and you see these shiny new addons and bonuses that you can buy right now. The ad even says collector’s edition. You get a shiny aluminum case to keep your game in. Maybe an extra in-game weapon. You get a neat toy to play referencing the game as well. You get all of this for an extra $30/$50. Not quite as much as the original game, so the added cost doesn’t seem like a problem to spend.

The two problems with this thinking comes from biases known as “Mental Accounting” and “Pain of Paying.”

Mental Accounting, simplified, is the categorizing of our money. Not wholly bad, except we tend to make money non-transferable between categories once we have categorized it.

Image you were going to a concert. In one case, you had pre-purchased your ticket ($100) but along the way you lost the ticket and to buy a new one it will cost you another $100. Would you buy the ticket again? In a different case, you were going to buy the ticket at the ticket-counter and found out that you lost $100 bill, and to buy a ticket will still cost you $100. Would you buy the ticket in this case?

Would you be surprised if most people would buy the ticket in the second case, if you’d lost the money over losing the ticket?

In both cases you’ve lost something and both are worth $100, but we typically treat each item differently.

In case 1, we’ve already assigned $100 to the concert so allocating more money into the concert funds, making the concert seem to have a cost of $200 to attend, seems like a waste.

In case 2, we haven’t allocated money into the concert funds, so we don’t perceive that the concert cost us $200 to attend.

With the example that I gave, you might think that this would be an argument against buying bundles and addons, but you aren’t double-paying for the same content. If you hold off until I explain “Pain of Paying” then it might come together a bit more.

“Pain of Paying” in essence comes from the inequality that we treat cash and non-cash currencies. The further from cash that we are, the less “painful” it feels when spending. It’s the difference between using a credit-card and spending it with little regard in the moment versus using paper cash and seeing a physical devaluing of the money that you have on-hand.

When going out to dinner and it comes time to pay, what feels worse: paying by cash or paying by card? Most would say paying by cash feels worse.

What about if you had to pay for each bite that you eat? Eating would be a lot less enjoyable as you feel each dollar leaving your wallet, though it would be much more cost-effective since you probably wouldn’t over eat. At some point, the Pain of Paying becomes greater than the satisfaction of the next bite.

But pain is logarithmic.

Obviously fudged units. Meant to be a conceptual diagram.

What that means is for every added unit of payment, the added pain felt is exponential less in addition to previous pain. Like when you go out with friends and figure out how to split the bill. The most painful way is to have everyone pay for exactly what they ordered, and the least would be having one person pay the one time and cycle through who is paying every time you go out. It feels good to get something for free from your friend, it feels good to pay for somebody else’s stuff, and the Pain of Paying amongst your group is reduced.

With “Pain of Paying” in mind, that means that the additional $30 for your bundle becomes a lot less painful than thinking above making a full $90 purchase. You have $60 already categorized (Mental Accounting) towards your game and the added satisfaction of the addon is typically more than the added painfulness of paying $90 over the $60. If Mental Accounting weren’t a bias to pay attention to, then the painfulness of an additional $30 probably would be more than the satisfaction of the addon that you’re getting, many of which would be a crappy stocking stuffer or step up above a happy meal toy.

But “Pain of Payment” also explains things like In-Game currencies like XBox Live points and Gift Cards and how we are more willing to throw these back into the store over real money.

“Pain of Payment,” as we’ve talked about it is amplified/diminished by two things, distance towards cash and salience (how immediate is our notice of money spent). If we buy XBL points or other in-game currency, then that money becomes categorized (Mental Accounting) and there becomes an immediate separation between points and cash. It may not feel like it at the moment that you purchase your XBL points, but given time, you feel like your XBL points are doing nothing but sitting there just waiting to be spent; making it easier to browse the XBL store and spend those points.

Actually, Prepayment is a great way to focus our attention on enjoying the experience over the weighing of “pain of payment” against the satisfaction of the what we bought.

Probably the biggest reason why we do pre-order things is to keep the “pain of payment” as separate from the experience of what was purchased as possible. Preordering the game when we don’t know the real value of the game, not know if it really is worth the $60 purchase when we could compare it to other $60 games out at the time, and experiencing the game without that $60 purchase directly in mind makes the game feel a lot more satisfying. That doesn’t make a bad game good, but it does help make us less critical about the game and possibly overlook the little irritations that the game does have.

If you had worked all week for the extra money to buy a game, drive to the store, pick it up, go home and the game turned out to be mediocre or even bad, how do you think you’d feel? I know I’d feel pretty sour about the whole experience. Not break-disc-in-half sour, but “why is this minor annoyance SO GOD-DAMNED ANNOYING”-sour.

Does this mean that I’ll stop preordering games and bundles with useless additions? Probably not altogether. I’ll still be preordering games that I am truly excited about to keep the satisfaction as high as possible when the game does come out. But having this information does mean that I know why I’m making such stupid decisions with my money for things that I don’t always care about. Maybe I can second guess myself enough now to not have a 2016 shelf of useless junk or at least half it this year around.